Data collected from Coinstar, whose coin-counting kiosks are used around the world, found there would be significant Mint cost increases without the US penny. Coinstar looked at their experience in Canada where the penny was eliminated in 2013 and found reduced “velocity” or frequency of coin recirculation.
Two-thirds of all coins recirculated through the U.S. Federal Reserve System and commercial banks and thrifts come from coin-cashing services. Since pennies comprise a majority of the coins recirculated through this process, eliminating the penny would reduce the frequency of people returning coins, based on Coinstar’s experience in Canada.
Coinstar found the volume of Canadian nickels and dimes recirculated through these services fell off 35 percent without the penny. They estimate that if the U.S. penny were eliminated, and the Mint offset just 25 percent of the reduced volume of recirculated coins with new nickels, dimes and quarters, produced at 2015 metals prices, it would cost the Mint an additional $77 million.
Two factors play into the increased government costs. First, the net costs rise or fall with metals prices. Using the lowest metals prices over the last decade, the Mint would have to spend an additional $60 million to maintain adequate coin recirculation, and applying the highest metals price of the last decade, the Mint would have to spend an additional $181 million per year. Second, the net costs also rise if the Mint has to offset 50 percent or 75 percent of the reduced volume of recirculated coins.
Coinstar argues there will be a $295 million real annual cost to U.S. taxpayers if the penny is eliminated.